In a resilient display, the Indian Rupee (INR) maintained a stable trajectory with a slight positive inclination on Tuesday, propelled by foreign portfolio inflows, securing its position as the leading currency in the Asian markets for January 2024. The Finance Ministry, in its latest review, highlighted the nation’s economic resilience attributed to robust domestic demand, investment-led strategies, and macroeconomic stability.
Despite the global challenges, the Finance Ministry envisions India’s ascent to becoming the world’s third-largest economy, projecting a Gross Domestic Product (GDP) of $5 trillion in the next three years. However, external risks stemming from persistent inflation, sluggish global growth, and fiscal pressures, coupled with tensions around the Red Sea, pose potential threats.
Investors are keenly awaiting the outcome of the Federal Open Market Committee (FOMC) January meeting on Wednesday, where key interest rates are anticipated to remain unchanged for the fourth consecutive time. Attention will then shift to India’s Interim Budget 2024 for fiscal year 2024–25 on Thursday.
Indian Rupee’s Resilience and Growth Highlights
The Indian Rupee emerges as the top-performing currency in the Asian markets for January 2024, boasting a 1% to 2% appreciation.
As of January 29, India’s GDP stands at an estimated $3.7 trillion, showcasing substantial growth from its tenth position a decade ago with a GDP of $1.9 trillion.
The stability of the INR is credited to timely interventions by the Reserve Bank of India (RBI) in the FX market, involving both the buying and selling of Dollars.
India’s Fiscal Budget 2024–25 aims to reduce the fiscal deficit to 5.30% of GDP from the current fiscal year’s 5.90%, with plans to boost welfare spending and further reduce the deficit to 4.5% of GDP by fiscal year 2025–26.
Global Economic Indicators and Technical Analysis: USD/INR Consolidation Continues
The US Dallas Fed Manufacturing Business Index for January hits -27.4, its lowest level since May.
The US Core Personal Consumption Expenditures Price Index (Core PCE) for December sees a 0.2% MoM increase, with an annual rise of 2.9% YoY.
According to CME Group’s FedWatch tool, 42% of traders anticipate a 25 basis points (bps) rate cut by the US Federal Reserve in March.
In technical analysis, the Indian Rupee remains on a flat note against the US Dollar, consolidating within the 82.78 and 83.45 band. The USD/INR pair, residing in a descending trend channel, shows potential upside as it hovers above the key 100-period Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) at the midline of 50.0 signals a lack of clear direction.
The upper boundary of the descending trend channel at 83.25 presents the first resistance, with a breakthrough possibly leading to levels of 83.35 and 83.47. Conversely, a breach below the 100-period EMA and the psychological level at 83.00–83.05 could prompt a move to 82.90, followed by the lower limit of the descending trend channel at 82.72.
